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[amibroker] Re: Short system advice?



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I wrote something like this awhile back ( SFO ) i.e. a Signal File 
Optimizer which will allow combining of signals that with IO could 
be optimized for signal weights and percent invested long / 
short ... 

Is that more or less what you are looking for ?

--- In amibroker@xxxxxxxxxxxxxxx, "Brian" <brianrichard99@xxx> wrote:
>
> ChrisB,
> 
> No problemo. Do what you can and get back to me later.
> 
> Basically, I am talking about building an include (modular code) 
> that weights buy/sell signals according to a percentage (of all 
> available signals), rather than a static number. I haven't thought 
> it out too much, but this seems like something many system 
> developers would want, so if I build it -- it goes in the AFL 
> library -- where the others can pick on my code and clean it up 
for 
> me ;-) I'm a data guru more than a programmer these days.
> 
> Thanks,
> 
> Brian
> 
> --- In amibroker@xxxxxxxxxxxxxxx, kris45mar <kris45mar@> wrote:
> >
> > Brian
> >   
> >   You've lost me, I'm afraid. This is clearly way ahead of where 
I 
> would  hope to be with AFL and system design, even some time from 
> now, but the  ideas are intriguing.
> >   
> >   Regards.
> >   
> >   ChrisB
> > 
> > Brian <brianrichard99@> wrote:          So far it looks like I 
> will be weighting signals based on 1) how 
> >   consistently leading the indicator is, and 2) various ratios 
> used to 
> >   identify profitability during the optimization process. 
> Currently my 
> >   signals are all equal weight. As I get used to how the system 
> >   performs in papertrading, I will tweak the weights 
accordingly. 
> I 
> >   will be writing some code to give each indicator a ratio 
> relative to 
> >   all other signal ratios in its signal group. That way I don't 
> have 
> >   to assign a number, which would force me to become refamiliar 
> with a 
> >   new signal range (1-100 is now 1-120, etc.). The results in AA 
> would 
> >   then come out as percentages instead of integers, that way.
> >   
> >   If you come up with a better weighting method please send me 
an 
> >   email at brian (at) brianrichard (dot) com.
> >   
> >   Thanks!
> >   
> >   Brian
> >   
> >   
> >   --- In amibroker@xxxxxxxxxxxxxxx, kris45mar <kris45mar@> wrote:
> >   >
> >   > Brian
> >   >   
> >   >   Good feedback, thanks.
> >   >   
> >   >   Yes "feeler trades" is basically where I am at at the 
> moment. 
> >   Keep probing the market, if good, add more, if bad, too bad.
> >   >   
> >   >   A recent presentation in Perth by a systems developer (who 
> sells 
> >   his  signals commercially so I am not interested: I am too pig 
> >   headed for  this I suppose) is based on this principle. He 
runs 
> 10 
> >   systems over the  top 30 US stocks. If on any day there are 7 
or 
> >   more buy signals from  the individual systems, this is his buy 
> >   recommendation. Sort of a  weight of evidence theory. Seems 
> based on 
> >   sound statistics, thousands  of trades in his stats, stop and 
> >   reverse system, in and out of sample  testing with smooth 
equity 
> >   curve and manageable drawdowns. EOD only and  entry/exit on 
open.
> >   >   
> >   >   Similar I guess to what you are doing by weighting your 
> signals. 
> >   This may ultimately where I am headed.
> >   >   
> >   >   Sounds like I have more coding to learn: half the fun, 
> though.
> >   >   
> >   >   Regards
> >   >   
> >   >   ChrisB
> >   >   
> >   > Brian <brianrichard99@> wrote:          ChrisB,
> >   >   
> >   >   I just completed another "system" that's comprised of 
about 
> 15 
> >   >   different proprietary indicators, all of them optimized 
for 
> both 
> >   EOD 
> >   >   and Weekly timeframes, as well as for a specific group of 
> 500 
> >   >   stocks, ETFs and CEFs. I used to look at just two or three 
> >   >   indicators (a "system"), but found each indicator has its 
> unique 
> >   >   weakness. So now I just go with looking at all of the 
> signals 
> >   that 
> >   >   all of my best indicators generate. I weight each signal. 
I 
> also 
> >   >   look at signals that are up to 3 bars old, and weight 
those 
> >   signals 
> >   >   less.
> >   >   
> >   >   I will eventually try to automate all of this 
optimization. 
> Not 
> >   >   there yet.
> >   >   
> >   >   I also separated out trending signals from daily buy/sell 
> >   signals, 
> >   >   so I really have a separate trend system as well.
> >   >   
> >   >   I've read more than once, from reading passages written by 
> very 
> >   >   profitable traders, that their systems generally take the 
> same 
> >   form 
> >   >   as the one I've created. Very few boil everything down to 
> one 
> >   type 
> >   >   of trade that they do over and over. Problem with those 
> single 
> >   setup 
> >   >   trades is you still need to look at all important 
variables 
> >   outside 
> >   >   of the setup that can affect the setup. A mentor 
statistican 
> >   friend 
> >   >   of mine recommended I build in an additional "trade 
> >   cancellation" 
> >   >   system that lets me know when outside variables are 
building 
> >   against 
> >   >   the system signal. This helps me sort the best trades out 
> from 
> >   the 
> >   >   bunch.
> >   >   
> >   >   I am using no equity curve. IMO that would just seem to 
add 
> >   another 
> >   >   layer of unnecessary complexity. Focus on money 
management --
>  
> >   >   scaling and scaling out, user "feeler" trades, etc. That 
> will 
> >   likely 
> >   >   get you farther down the road. My personal goal is to use 
my 
> >   system 
> >   >   to identify good trades for my discretionary style of 
> trading.
> >   >   
> >   >   Just my toe scents.
> >   >   
> >   >   ~Brian
> >   >   
> >   >   
> >   >   
> >   >   --- In amibroker@xxxxxxxxxxxxxxx, kris45mar <kris45mar@> 
> wrote:
> >   >   >
> >   >   > Phew, Yuki.
> >   >   >   
> >   >   >   Honoured to humbled to receive your lengthy reply. 
> Please be 
> >   >   warned:  this inspirational, supportive ( and midly 
> cajoling ) 
> >   reply 
> >   >   ( thank  you! ) may be  transferred into my "Yuki says" 
> >   handbook!  
> >   >   Everything you say strikes a resonant note though, and is 
> taken 
> >   in 
> >   >   good  spirit. 
> >   >   >   
> >   >   >   I have 25% DD with 4 wins out of the last 30 
> discretionary 
> >   >   trades.
> >   >   >   Looking through my last two years' trades tells me 
that 
> what 
> >   >   worked in  2004 is not working in 2005/6. This brings me 
to 
> the 
> >   >   point in my 2005  trading plan where I defined conditions 
to 
> >   stop 
> >   >   trading. I now need a  change of direction: the plan is to 
> >   continue 
> >   >   to explore AB, AFL and the  superb posts on this board 
> towards 
> >   >   developing a mechanical system. It  can't be that hard for 
> me to 
> >   >   develope one that does better than my 2005  trading year. 
> >   Whether I 
> >   >   can then actually trade it is a whole different  ball game.
> >   >   >   
> >   >   >   You said:
> >   >   >   
> >   >   >   "
> >   >   >   And thank goodness not everyone can do this.  We need 
> some 
> >   >   productive
> >   >   >   members of society, too.  ^_-
> >   >   >   "
> >   >   >   
> >   >   >   LOL.... and yet the lesson we learn about ourselves by 
> >   trading 
> >   >   can make us more productive in other areas! 
> >   >   >   
> >   >   >   In summary: 
> >   >   >   
> >   >   >   You will never avoid drawdowns: agreed.
> >   >   >   Sharper gains (with a reliable system) may come when 
the 
> >   equity 
> >   >   curve is below its MA. Sounds logical, and worth exploring.
> >   >   >   
> >   >   >   All I am asking is this:
> >   >   >   
> >   >   >   Markets change over time (that is why there is no Holy 
> >   Grail) 
> >   >   and so  should our systems, or the ones we choose to trade 
> with, 
> >   not 
> >   >   respond to  this? Or we may choose to stand aside for a 
> while. 
> >   Or 
> >   >   just trade  different markets with concurrently different 
> >   systems to 
> >   >   create a  smoother equity curve overall?
> >   >   >   
> >   >   >   Could you comment on whether you trade with one system 
> only 
> >   or 
> >   >   more  than one? And if more than one, what would be a 
> trigger to 
> >   >   change if  the Equity curve is not the signal to do so? 
> >   Drawdowns? 
> >   >   Sleepless  nights? Declining expectancy? This has to part 
of 
> our 
> >   >   business plan  after all. In 2004 I achieved my trading 
> goals, 
> >   2005 
> >   >   was not a  successful one. Message: time to stop doing 
what 
> I am 
> >   >   doing: it is not  working. Do something else. The goal 
then 
> is 
> >   to 
> >   >   replace what I am doing  with something that does work. 
> >   >   >   
> >   >   >   I realise the answers to these questions are personal, 
> but 
> >   it 
> >   >   is  invaluable to get some insight to the philosophies of 
> >   others, in 
> >   >   an  attempt to know where to start.
> >   >   >   
> >   >   >   Regards
> >   >   >   
> >   >   >   ChrisB
> >   >   >   
> >   >   >   
> >   >   > 
> >   >   > Yuki Taga <yukitaga@> wrote:          Hi kris45mar,
> >   >   >   
> >   >   >   Monday, March 13, 2006, 11:35:06 PM, you wrote:
> >   >   >   
> >   >   >   k>   b. When the Equity is above the MA, then take the 
> >   signals.
> >   >   >     
> >   >   >   k>   c. when the equity curve falls below its MA, then 
> >   either.
> >   >   >     
> >   >   >   k>       i. stop trading that system until such time 
as 
> the 
> >   >   curve goes back above the MA.
> >   >   >     
> >   >   >   k>       ii. or severely reduce position size.
> >   >   >     
> >   >   >   k>       iii. and/or swap over to another system that 
is 
> now 
> >   >   above its MA.
> >   >   >     
> >   >   >   You will get various opinions on this, however I think 
> it 
> >   really
> >   >   >   boils down to just how logical you suspect your system 
> >   >   methodology
> >   >   >   is, and whether you suspect it is actually and finally 
> being
> >   >   >   arbitraged out of existence.
> >   >   >   
> >   >   >   If the system has worked for several business cycles 
in 
> >   various
> >   >   >   market modes, and has never really gotten into serious 
> >   trouble --
> >   >    in
> >   >   >   other words, it's a system you can trade -- then it 
> would 
> >   seem 
> >   >   to me,
> >   >   >   and indeed is what I do, that the time to be more 
> careful is 
> >   when
> >   >   >   equity has been running well above the MA for some 
> rather 
> >   lengthy
> >   >   >   period of time. I'm inclined to bump *up* position 
size 
> a 
> >   little 
> >   >   bit
> >   >   >   when I start experiencing a losing streak -- in other 
> words 
> >   when 
> >   >   I
> >   >   >   get mean reversion or worse of the equity curve.  I 
> would 
> >   >   certainly
> >   >   >   not stop trading when that happens.  I think your gut 
> >   feeling is
> >   >   >   exactly opposite of what you should do.
> >   >   >   
> >   >   >   The sharpest gains and nicest times you are likely to 
> ever 
> >   have 
> >   >   are
> >   >   >   when equity is making the swing from below average to 
> above 
> >   >   average.
> >   >   >   This is much more fun than the opposite, and you are 
> going to
> >   >   >   experience both. So why would you consider stopping 
> trading 
> >   when
> >   >   >   equity dips below average? Immediately, you would then 
> be 
> >   >   preparing
> >   >   >   to cheat yourself out of your best performing part of 
> the 
> >   cycle, 
> >   >   and
> >   >   >   you would be ready to embrace the worst cycle segment 
of 
> >   your 
> >   >   system:
> >   >   >   when equity moves from above average to below average.
> >   >   >   
> >   >   >   In the end, it all boils down to confidence.  You 
either 
> >   have a
> >   >   >   viable system, or you don't.  If you have one, follow 
> it.  
> >   If you
> >   >   >   can't stand the drawdowns ... IMHO, you don't have a 
> viable 
> >   >   system,
> >   >   >   and probably should not be trading it.  No one should 
> trade 
> >   any
> >   >   >   system that has drawdowns they cannot stomach, and 
> stomach
> >   >   >   comfortably, probably max system percentage drawdown 
> times 
> >   two, 
> >   >   maybe
> >   >   >   times 2.5 or three.
> >   >   >   
> >   >   >   But if you really do have a system, take every signal. 
> >   Period. 
> >   >   If you
> >   >   >   want to "play" your system a little bit, consider 
> something 
> >   like
> >   >   >   *lightening* position size -- slightly -- when equity 
> has 
> >   been
> >   >   >   running above average for some period of time, and 
> >   *increasing* 
> >   >   it
> >   >   >   ... again, slightly ... when equity has been running 
> below 
> >   the 
> >   >   line
> >   >   >   for some time.  You have to judge when these 
conditions 
> >   might 
> >   >   apply
> >   >   >   after carefully analyzing your system yourself.
> >   >   >   
> >   >   >   But using the MA of equity to flatly refuse or take 
> signals 
> >   is 
> >   >   simply
> >   >   >   a different form of "Holy Grailism".  It is a fear of 
> taking 
> >   >   losers,
> >   >   >   or an attempt to altogether avoid taking losers, which 
> >   absolutely
> >   >   >   must be taken in any systematic trading. You simply 
have 
> to 
> >   have 
> >   >   a
> >   >   >   system in which you can *stand* to take the losers, 
and 
> be
> >   >   >   comfortable with them.  If you don't, you can't trade 
> it, 
> >   and 
> >   >   playing
> >   >   >   around using the equity curve as an ultimate filter is 
> not 
> >   >   likely to
> >   >   >   made a dangerous system safe, or an uncomfortable 
system 
> >   >   comfortable.
> >   >   >   
> >   >   >   You will never, ever, find a system that has an equity 
> curve 
> >   that
> >   >   >   doesn't dance on both sides of a MA.  Life doesn't 
work 
> that 
> >   >   way. But
> >   >   >   if the curve is obviously solid, in other words, a 
real 
> >   curve or
> >   >   >   slope, and not an amusement park thrill ride, and all 
> the 
> >   metrics
> >   >   >   look nice over thousands of trades and many years, you 
> may 
> >   want 
> >   >   to
> >   >   >   think about doing exactly the opposite of what your 
gut 
> >   tells you
> >   >   >   when you hit a soft patch.
> >   >   >   
> >   >   >   OTOH, if the last sentence above applies ... why 
stress 
> >   yourself 
> >   >   at
> >   >   >   all?  Take the *&$% signals as they come, and relax.  
> ^_^  
> >   If you
> >   >   >   cannot stand a loss the magnitude of which would tell 
> you 
> >   that,
> >   >   >   indeed, your system is no longer functioning, you are 
> >   probably 
> >   >   not
> >   >   >   well enough capitalized to be in this business.  Not 
> >   everybody 
> >   >   is.
> >   >   >   And thank goodness not everyone can do this.  We need 
> some 
> >   >   productive
> >   >   >   members of society, too.  ^_-
> >   >   >   
> >   >   >   Yuki
> >   >   >   
> >   >   >             
> >   >   > 
> >   >   >     Please note that this group is for discussion 
between 
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